AUX Blog

By Doug Burke, President/CEO of CU Service Network
I attended the AXFI credit union data analytics conference in June and continue to be amazed at how fast the financial world is moving these days. It’s moving so fast, that at times, it’s down right scary. At the same time however, there is opportunity. Here are a few highlights from some of the speakers and sessions:

Patrick Schderdtfeger, Futurist – Embracing Disruptive Innovation

I very much enjoyed his presentation. Sometimes we get so focused on today, we lose site of the bigger picture. He talked about technology advancements and trends. Sometimes we get caught up and don’t see how fast the world is changing around us.

The advancements are due to the rapidly decreasing costs of processing.

• His example was, according to Amazon, the storage cost of 1 terabyte of data has gone from $17,000 to $3 in just 20 years
• As we continue to hear, we are operating in a world that now has the Amazon Effect. Consumers are bench-marking everything to Amazon.
• The rapid improvements in technology and allowing fintechs to flourish
  o  Mobile payments by WeChat Pay from China; I actually saw a store at Mall of America (where the conference was held) that was accepting it!
  
  o  The new Apple credit card, what effect will they have?….it’s Apple
  o  He talked about Facebook cryptocurrency, which was then announced this week
• He mentioned according to John Olin, Washington University, 40% of the S&P 500 companies will no longer exist – CHANGE!
• His recommendation is to go on the offensive rather than defensive
•  It will require getting involved in data analytics & key elements
  o  Machine learning – having programs designed improve productivity or meeting      members expectations
  o  Making recommendations to members at the right time & improving the member journey

He did a whole segment on autonomous driving from cars, to trucks, farming equipment & construction equipment

• “Are we prepared for the change?” he asked.
• By 2023 the cost to purchase and operate an electric car will be cheaper than a gas-powered car.
• Consumers may purchase less cars in an autonomous Uber-type world, and therefore less car loans at credit unions.

Natural language processing will be one of the next big things, called it the Alexa Effect.

• People are getting used to talking to a computerized voice. With machine learning and increases in technology, it’s poised to accelerate:
• Siri – 2011
• Alexa – 2015
• How about swapping our your IVR to a system where members and the systems only talk?
• How can the technology be deployed in a call center?

Downside to the technology is job displacement:

• The # of finance employees per $billion in revenue is already down by 40%, The Hackett Group
•  In a Bloomberg report, one of the top jobs at risk of automation are loan officers. They put the probability the positions will be automated at 98%. Look at Rocket Mortgage and the speed in their advancement in the last few years. The technology is already here
• We will need to be prepared to retrain the people in these positions

Another example of Disruptive Innovation is the blockchain protocol and the distributed ledger. Examples of future uses:

• Tracking inventory
  o  Tracking shipments
  o  Smart contracts
  o  Supply chain management
  o  Identity
  o  KYC (know your member)
• Some of these uses will cut the middleman out of the transaction; banks and credit unions

Roger Grimes, Quantum Computing

Right away I knew I was in trouble when Roger was referencing Albert Einstein. His talk was way over my head, but very interesting at the same time.

So, what is quantum computing?

Traditional computers are binary and use a series of 0 or 1. A quantum computer (pictured below) uses something called a qubit, particles and all these other physicist-type words and concepts.

Why is this important?

• These new computers will be able to break todays modern day encryption keys. So, the U.S. govt., China, Microsoft, IBM, Google and others are less than 1 year from having an operational system.  The new system will be able to create new “unbreakable” encryption
• Amazingly fast and powerful. Todays computers would not be able to calculate all the possible moves on a chess board. The quantum computer should be able to do it in under 2 minutes
• They say it could help with the design of new medicines, better solar batteries and new chemicals

I hope you enjoyed this recap of  the topics that caught my attention at the AXFI Conference. CU Service Network is commited to staying abreast of new advancements in FI technology and providing education to our credit unions. If you would like to chat further about my takeaways or learn more about what we are doing to support credit unions in this area,  please reach out to me at dburke@auxteam.com.